Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. So what are the best stocks to buy now or put on a watchlist? Google parent Alphabet (GOOGL), Nike (NKE), PayPal (PYPL), Progyny (PGNY) and Applied Materials (AMAT) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects rising confidence that the economy will eventually recover from the coronavirus.
The coronavirus remains a concern, but cases have tumbled as vaccinations reach more and more Americans. But mixed economic data of late has led to some choppy action.
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The market pulled back after the latest Fed meeting, where policymakers signaled they expect to raise interest rates by late 2023. The selloff intensified after St. Louis Fed President James Bullard declared he sees the Fed starting to raise interest rates in late 2022. Markets have been bouncing back once again however.
Now is a time to be looking to add stocks to one’s watchlist, but why do the stocks chosen above stand out? Before turning to that question, it is important to consider how one goes about choosing a stock in the first place. Superior fundamentals and technical action, and buying at the right time, are all part of a shrewd investing formula.
Best Stocks To Buy: The Crucial Ingredients
Remember, there are thousands of stocks trading on the NYSE and Nasdaq. But you want to find the very best stocks right now to generate massive gains.
The CAN SLIM system offers clear guidelines on what you should be looking for. Invest in stocks with recent quarterly and annual earnings growth of at least 25%. Look for companies that have new, game-changing products and services. Also consider not-yet-profitable companies, often recent IPOs, that are generating tremendous revenue growth.
IBD’s CAN SLIM Investing System has a proven track record of significantly outperforming the S&P 500. Outdoing this industry benchmark is key to generating exceptional returns over the long term.
In addition, keep an eye on supply and demand for the stock itself, focus on leading stocks in top industry groups, and aim for stocks with strong institutional support.
Once you have found a stock that fits the criteria, it is then time to turn to stock charts to plot a good entry point. You should wait for a stock to form a base, and then buy once it reaches a buy point, ideally in heavy volume. In many cases, a stock reaches a proper buy point when it breaks above the original high on the left side of the base. More information on what a base is, and how charts can be used to win big on the stock market, can be found here.
Don’t Forget The M When Buying Stocks
Never forget that the M in CAN SLIM stands for market. Most stocks, even the very best, will tend to follow the market direction. Invest when the stock market is in a confirmed uptrend and move to cash when the stock market goes into a correction.
The stock market pulled back following the latest news on interest rates, but has already rallied back. The broad S&P 500 and the tech-heavy Nasdaq both hit record highs, though the latter index slipped back somewhat on Friday. In addition, the Dow Jones Industrial has just retaken the key 50-day moving average.
The market has now moved back into a confirmed uptrend. Institutional selling has been modest, so investors should feel confident increasing their market exposure by purchasing top stocks. Do not forget to stay flexible, and maintain discipline in applying buying and selling rules however.
Now is a good time to be buying fundamentally strong stocks coming out of sound chart patterns. The stocks featured below are potential candidates.
But remember, as the past week showed, things can quickly change when it comes to the stock market. Make sure you keep a close eye on the market trend page here.
Best Stocks To Buy Or Watch
- Applied Materials
Now let’s look at Google stock, Nike stock, PayPal stock, Progyny stock and Applied Materials stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Google parent Alphabet is in buy zone after passing a 2,431.41 flat base buy point. It is actionable as high as 2,553.05. Shares have been trading just above or below the buy point for more than two weeks, usually tiny moves in below-average volume.
The relative strength line for GOOGL stock is around record highs. This gauges a stock’s performance compared to the S&P 500.
Google is on IBD Leaderboard and IBD Long-Term Leaders.
GOOGL stock has a perfect IBD Composite Rating of 99. That puts it in the top 1% of stocks tracked overall. Earnings outshine stock market performance, with its EPS Rating a top notch 94 out of 99.
Earnings have grown by an average of 50% over the past three quarters. This is double the 25% sought by CAN SLIM investors.
Analysts see strong growth ahead, with Google earnings per share expected to explode 65% in 2021, and then growing by a further 8% in 2022.
The tech giant has a Relative Strength Rating of 83. That means it has outperformed 83% of stocks tracked over the past 12 months in terms of price performance. Recent performance is strong, with Google stock rising around 39% so far in 2021. This far outstrips the S&P 500’s gain of just over 14%.
Big money has been snapping up GOOGL stock of late, which is reflected in its Accumulation/Distribution Rating of B-.
Google stock was boosted after the firm posted first-quarter earnings and revenue that crushed analyst estimates. YouTube advertising revenue topped expectations, while the company also authorized additional GOOGL stock buybacks.
In the March quarter, Alphabet repurchased $11.39 billion of its GOOGL stock, up from $8.5 billion in the year-earlier period. Alphabet had roughly $4 billion left in a share repurchase program. The new buyback authorization brings that to about $54 billion.
The internet giant’s core search advertising business also continued to rebound, though the coronavirus pandemic still pressures sectors such as travel.
While Google has expanded into cloud computing and consumer hardware, digital advertising still makes up the lion’s share of revenue. Google announced in early March that it will stop employing web browser-tracking technology for the purpose of selling advertising. Earlier, Google said it would phase out third-party cookies.
Google plans to utilize “contextual” technology that enables advertisers to target aggregated groups of consumers with similar interests, such as travel, sports or fashion.
Nike stock is at the top of a buy zone after the stock exploded almost 16% Friday following a bumper earnings report. It topping a buy point of 148.05 from a long consolidation. Nike stock is actionable as high as 155.45.
The massive move saw NKE stock rocket from both its 50 and its 200-day lines. This is a bullish indicator.
The relative strength line for Nike stock is spiking and near recent highs, after falling for most of 2021. Look for the line to continue following its post-earnings boost.
A sign of how impressive the stock’s post-earnings bump was is how its Composite Rating jumped from 52 before its earnings, and now sits at 94 out of 99.
Its EPS Rating also improved, though it still sits at a sub-optimal 74 out of 99. A sign of Nike’s improving fortunes is the fact EPS has grown by an average of 102% over the past three quarters. This smashes CAN SLIM requirements for 25% growth over that period. Earnings have also accelerated for the past four quarters in succession.
Nike earnings per share for the fiscal fourth quarter came in at 93 cents, crushing estimates for 51 cents. It was a massive improvement on the year-ago loss of 51 cents a share, which came amidst the Covid-19 pandemic. Revenue soared 96% to $12.3 billion, topping views for $11.03 billion.
North American sales shot up 141% to $5.4 billion. Europe, Middle East and Africa sales jumped 107% excluding currency changes to $3 billion. Asia Pacific & Latin America sales surged 76% to $1.46 billion.
Greater China sales grew 9% to $1.9 billion. China called for a boycott of Western goods after Nike and others accused Chinese officials of using forced labor in the cotton industry. Comparisons also were tougher in China, where the pandemic had already peaked a year earlier. On an earnings call, Nike said it’s seeing monthly improvements in China sales.
While most Nike stores are now open, digital purchases have fueled sales throughout the pandemic. Nike Brand Digital revenue jumped 41% in Q4 after soaring 147% in 2019. Online sales surged 59% in Q3, after accelerating to 84% growth in Q2 from 82% in Q1. Late Thursday, Nike said its membership program, which now tops 300 million worldwide, is helping to boost online sales.
Nike sees fiscal 2022 sales topping $50 billion vs. analyst views for $48.5 billion.
Going forward, analysts are bullish about Nike earnings as the world recovers from the Covid-19 pandemic. Full year EPS is seen popping 19% in fiscal 2022, and by 18% in fiscal 2023.
The Olympics are seen as a massive marketing opportunity to build brand awareness and pump new products. Nike’s latest gear will be on full display at the upcoming Tokyo Olympics as it designed the apparel and shoes for Team USA. Nike’s current deal with Team USA lasts at least through the 2028 Olympics in Los Angeles.
“This summer in Tokyo, we look forward to sharing the next-generation of FlyEase and its mission of inclusive innovation as well as delivering some new and exciting women-specific innovations,” said Nike CEO John Donahoe boasted during the firm’s March 18 earnings call.
Two Top Chinese Stocks Flashing Buy Signals
PayPal stock is just above a buy zone after clearing a smaller cup within a consolidation. The entry point here is 277.96.
MarketSmith analysis also shows it is nearing a cup base buy point of 309.24. Investors could view this as the official buy point. But ideally PYPL stock would form a handle
The relative strength line is improving, moving above the mid-April peak. It has some work to do to reach a new all-time high however. The payments stock has a long history of outperforming the broader market, a key reason why it is on the IBD Long-Term Leaders list. It is also on IBD Leaderboard.
PayPal stock has seen its Composite Rating come back strongly, and it now sits at a very strong 93. Stock market performance is improving, and it is now up around 24% so far this year.
Earnings are the stock’s key strength, with its EPS Rating coming in at a near-perfect 98 out of 99. EPS has grown by an average of 52% over the past three quarters. This reflects the current trend towards cashless transactions amid the Covid-19 pandemic.
When PayPal reported March-quarter earnings, revenue and total payment volume topping analyst estimates. EPS popped by 85% to $1.22 as e-commerce continued to boom amid the coronavirus pandemic. Revenue vaulted 31% to $6.03 billion. The strong results have been helping the stock advance.
Total payment volume processed from merchant customers jumped 50% to $285 billion. This was better than the $264.9 billion projected by analysts.
The company also said it added 14.5 million net new active accounts worldwide in the December quarter. Well known for its online checkout button, PayPal had 392 million active accounts worldwide as of March 31.
Meanwhile PayPal is looking into new growth avenues. It is now fighting it out with payments rival Square (SQ) in the cryptocurrency space. The two payment companies are marketing apps that let shoppers get discounts, make installments and buy cryptocurrencies.
PayPal‘s Venmo and the Square Cash App started off as person-to-person money-transfer services for family members and friends. Now they’ve evolved into broad consumer financial services apps fueling growth for these leaders in the burgeoning field of digital payments.
In late November, PayPal launched a cryptocurrency trading service, allowing clients to buy and sell Bitcoin.
In addition, PayPal customers will also be able to use cryptocurrencies to shop at the 28 million merchants on its network starting in early 2021, the company said.
PayPal also announced cryptocurrency trading on Venmo. The new feature allows customers to use these three types of cryptocurrency, plus Bitcoin Cash, to view crypto trends and make transactions. The rollout has already started, and will be available for all customers directly in the Venmo app within the next few weeks.
Progyny stock is actionable as it looks to stage a rebound off its 10-week line. The buy point currently is 58.60, and it runs as high as 64.46.
It comes after the stock failed to breakout from a three-weeks tight pattern.
The relative strength line for Progyny stock is just off a new high. PGNY stock is up more than 39% so far in 2021, which is better than the S&P 500. It has also ran as high as 243% above its 2020 lows.
Progyny stock holds a strong IBD Composite Rating of 94. Earnings are lagging stock market performance, but are improving.
The firm has seen its earnings accelerate for the past three quarters. EPS growth reached 275% in the most recent quarter.
The company, which went public in 2019, posted a profitable year for the very first time in 2020. Analysts see annual EPS improving by 171% in 2021, and then popping 39% in 2022. It has been getting upward revisions from analysts.
During the firm’s earnings call in February, management said they had seen no “skinnying down” of benefits by employers in an effort to control costs. In fact, they said when changes were made, they were to make their fertility offerings “more robust.”
Chief Operating Officer Peter Anevski also said the firm is eying M&A opportunities ahead as Progyny looks to emerge from the Covid era.
“2020 was definitely a year of managing through the pandemic,” he said. “2021 — in addition to sort of taking advantage of the opportunities that we have, with what we have in the space that we’re in now — is a year of real focus around those adjacencies and opportunities, including looking at some of the events that (are) out there, looking at any strategic acquisitions we could do.”
Applied Materials Stock
Applied Materials is forming a new cup with handle. The ideal entry here is 142.22, and it will be actionable up to 149.33.
The stock has broken a short downtrend, which is encouraging, and it is climbing towards its buy point.
The current base is second stage, which is positive. IBD research shows such early stage patters are more likely to lead to big price gains.
AMAT stock has a near-perfect Composite Rating of 97. It boasts a formidable combination of stock market and earnings performance. Its strong performance as won it a spot on the prestigious IBD Leaderboard.
Big money has been getting behind the stock of late, a key consideration for the CAN SLIM cognoscenti. It boasts a Accumulation/Distribution Rating of B-. This represents moderate buying among institutions over the past 13 weeks.
Back in May the chip equipment posted its best sales and earnings growth in four years.
The Santa Clara, California-based company’s EPS rose 83% to $1.63 a share per share, while revenue popped 41% to $5.58 billion. This beat analyst expectations on both counts.
For the current quarter, Applied Materials forecast adjusted earnings of $1.76 a share on sales of $5.92 billion. Wall Street had been predicting earnings of $1.56 a share on sales of $5.53 billion. In the year-earlier period, it earned $1.06 a share on sales of $4.40 billion.
“We are confident in our ability to outperform our markets as large, secular trends create sustainable demand for semiconductors and our leadership in materials engineering becomes increasingly critical to deliver new chip technologies.
Applied Materials provides some of the critical engineering for chip development. The company says its technology is used to produce nearly every new chip and advanced display in the world.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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